The stock market is a regulated market that brings together companies with funding requirements
and institutional or individual investors, banks and investment companies looking to make
financial investments. In France, the Financial Market Authority (Autorité des Marchés Financiers – AMF) is responsible for overseeing its correct functioning.
When a company wishes to diversify its financing sources and raise additional funds, it can decide to be listed on the stock exchange, in other words issue shares on the stock exchange for the first time, or carry out a capital increase if it is already listed. When investors have confidence in a company’s ability to thrive and want to grow their savings, they buy shares which represent a fraction of this company’s capital. By financing the company in this way, they become co-owners and accept the associated risks and potential gains.
By financing the company in this way, shareholders become co-owners and accept the associated risks and potential gains
In exchange for this acquisition, the company has a duty of transparency and provides investing shareholders with information regarding its financial performance and strategy, allowing them to make informed investment decisions. Investors also have a say in the company’s major decisions by voting at the Annual General Meeting, and receive dividends which are based on the company’s profit: this is the investment’s yield.
The primary market refers therefore to the market where new shares are issued for the first time, at a price set by the issuer depending on market conditions. The shares of listed companies are liquid, i.e. once acquired, investors can freely exchange them on the so-called secondary market (the “second hand” market). Supply and demand equilibrium for these shares determine their stock market price, i.e. their unit price. If buyers’ demand exceeds the sellers’ offer, the share price increases. If there are more sellers than buyers, the share price drops.
The stock market therefore plays a key role within the economy as companies rely on it to raise capital and pursue future economic growth.
Air Liquide and the CAC 40
The CAC 40 is used as an index for investors in the French market. It is a capitalization-weighted measure of the top 40 most significant companies on the Paris Stock Exchange. CAC 40 stocks are selected according to their market capitalization and their free float, i.e. portion of shares of a company that are in the hands of public investors and traded on the stock exchange.
As of December 31, 2017, Air Liquide was the 8th largest market capitalization in the CAC 40, with a market cap of €45 billion and 100% free float.